All Forum Posts by: Nathan Emmert

3% rents is always attractive... but then you also have to immediately wonder why someone sells a "cash cow" right?  Very rough looking neighborhood based on the outside of the building and the next door building... bars on the windows... several WTF pictures in the 25 they have. 

Mixed use will mean commercial financing which likely won't happen at that price point so you're look at an all cash purchase.  Only 1 picture of a furnace so you may be on the hook for Gas/heating which won't be insignificant in Buffalo.

It's worth looking at more but nothing you're going to figure out from the listing, likely need boots on the ground info.

Was the gf on the lease or just the gentleman in the army?

I believe breaking leases for deployment is US wide, not state by state... but as said, there are still some requirements.  Check those requirements and see if they also apply to his spouse/gf if they aren't deploying as well.

I don't invest out of state so not a lot of help there.  Remember, if you use a realtor suggested inspector they are likely to refer you to an inspector that's NOT going to ruin the deal (as the realtor would lose their commission).  There is a conflict of interest there on the referral.

So 16 hours over 2 days offsite led to a few interesting conversations recently, including a short conversation in renting furnished units to interns/co-ops.  My company rotates through a lot of co-ops on a semester basis throughout the year.  One of our current co-ops was telling me about an investor down in Cinci that had a great gig going renting out individual rooms to these co-ops and it got me thinking I may want to do something up here similar... but that's a significant change from simple multi-family investing... so what do I need to know?

I thought there were tax differences between landlords and what is more considered boarding/hotels... where is that threshold?

Anyone have experience in renting out furnished apartments? 

I know someone had talked about traveling nurses and more high turn over but high occupancy situations, any thoughts there?

How do you get around fair market housing issues with gender... I'm guessing you'd want consistent gender... do you place people that way or simply let the market self select?

What else should I think through?  Renting rooms for $600 would definitely be much higher than renting units.

"As is" just means they aren't going to do the repairs themselves... doesn't mean you can't find out what needs to be fixed and negotiate a better price... yes, always get an inspection (unless you're knowledgeable enough yourself).

It's also good to do them while the tenants are around... they have no financial stake in with holding information.  They can tell you about drips, creaks, bugs, if their maintenance requests are being taken care of, if the guy is taking short cuts, they are GREAT sources of info.

 Actually the data I saw showed about 55% for when the utilities were included (same data that justified the 50% rule)... that's not to say utilities only cost 5% of the rent... but shows more that when utilities are included in the rent, the rents are higher. 

A $500 rental without utilities has $250 of expenses (50%)... the same unit with utilities rents for $600 with $330 of expenses (55%) due to $80 for electric... for example.

 Nope, this is a C class (working class area but safe from violent crime/gangs, some drugs) area in a suburb of Salt Lake City.  It's just a run of the mill place, 2 stories split into 3 units, about 2,600 square feet.  Rentals are $600, $450, and $350... the $600 is still low (3 bedrooms, 2 bathrooms) and the $350 is low (2 bedrooms, 1 bathroom).  Water/Sewer/Trash are included per local customs in that area.  I paid $100k for the property which immediately appraised for $130k with $0 out of pocket knowing I could get the rents from where they were up to $1,600 or so a month.

As Nicole said, having tenants in can either be a blessing or a curse.

If they are bad, you have time and expense to go through to get them out... and immediately need to do rent readies on top of any rehabbing you might have planned (they don't tend to leave properties pristine if they are bad).

If they are good, you get immediate cash flow which might blunt the cost of needing to upgrade the units after they do leave.

The other downside is if the properties are severely mismanaged and you're locked into leases well below market value, you won't be able to immediately adjust those (you can try, but by law their lease carries forward... they might not realize that though).  As a long term buy and hold guy, I'm not as worried about needing to wait a year or two to get rents up to market rates.  One of the triplexes I bought, for example, was rented for about $900 a month total and I paid all utilities... 2 years later and it is rented for $1,400 a month and the tenants pay gas and electric... the rents probably still have another $200 a month to grow but I've kept 2 of the 3 tenants throughout this entire process saving me a good bit of money (no vacancy, no rent ready, no paying my PM 1/4 months rent to place new tenant).

Make sure you are comfortable with the lease... see if they are paying... if they are, welcome them with a big hug!

 In Utah, my taxes are about 1/2 of 1 months rent... here in MI they are just over 1 months rent typically.  These are C class area properties.

 Two issues with your analysis... he wants to fund $150k (no down payment) to get his cash back out... so his mortgage will be higher ($760)...

Also, you don't have a CAPEX budget in your numbers.

I think you'll find those two modifications destroy the cash flow pretty quickly.